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Property Mngt - Feedback on Costs

Discussion in 'Real Estate' started by Tronc, 5th Apr, 2008.

  1. Tronc

    Tronc Active Member

    Joined:
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    Location:
    ACT
    Got this list from a prospective property manager, what are people's thoughts on the costs:

    - 10% commission of gross rent collected
    - $12 admin fee per month
    - letting fee 1 weeks rent
    - inventory fee - $250

    I have another coming to provide me their quote and agreement this week, but want to know where this sits with those more experienced in this forum.

    Rent is likely to be around $380 per week, for smallish 3 bed house in outer suburb of Canberra, nice low maintenance garden, gas heating, well located to shops and hospital etc...

    Thanks

    Tronc
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You do need to compare with other PMs in the area - normal pricing varies, and I don't know the PM market in Canberra.

    Either way - it does seem pretty expensive ... 10% is high, especially with an admin fee on top.

    What is an "inventory fee" ?
     
  3. DexterJambles

    DexterJambles Member

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    Hi Tronc,

    As Sim said you really need to compare with the market in your local area, however as a rough guide I have a property manager looking after an IP property in WA and their rates are approx:

    - 10% commission
    - $50 per inspection
    - 2 weeks letting fee
    - approx $25 petties monthly

    There were cheaper managers available but this one seemed to be best out of those I interviewed and for the extra $200-300 or so per year the piece of mind is well worth it.

    DJ
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    DJ makes a good point ... a good property manager is worth their weight in gold ... unfortunately they are also just as difficult to find.

    A bad property manager can cost you a lot - both money and time/stress.

    I'm not suggesting that expensive property managers are better - only that price should not be the only factor in the decision.

    Don't forget to read Jacque's article: http://www.invested.com.au/75/selecting-effective-residential-property-manager-4169/
     
  5. Tronc

    Tronc Active Member

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    Inventory Fee is, and I quote 'inventory fee $250 covering the compilation of a comprehensive inventory and condition report in accordance with the legislation.'

    I don't mind paying for a good service, but I don't want to get ripped off either. This is my first go at renting out a property (we are moving to the Newcastle area), and from what I have read, it's a small price to pay to get a good property manager to ensure you get good tenants and a PM that protects your asset.
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    Like Sim said good agents are hard to find, though all of them love to take their cut, at 10% they only need to have 10 properties on the books and they cover their expenses very easily. Sounds like Real Estate Agents is a VERY lucrative business to be in...

    Cheers,

    Dan

    PS It might not be so don't run out and buy one.
     
  7. DaveA

    DaveA Well-Known Member

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    On the flip side on the coin... in southern sydney ive found the average is

    - 5.5% com,
    - 1 week letting fee
    - no admin fee

    but may just be more competition in the market...
     
  8. Jacque

    Jacque Team InvestEd

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    Those fees sound excessive, even for ACT. I'd definitely be doing some shopping around, if I were you.

    Current PM costs I pay (across both NSW and QLD):

    6-8% fees
    $3.50-$5 mthly postage and petties
    nil for inspection reports of any kind (inc initial condition reports)
    1 weeks (+GST) letting fees
    Half of leasing fee per tenant/renewal $18

    I also self manage so no fees there though I'd like to pay myself :D

    This is the first I've heard of a fee ever charged for an inventory, which sounds like a great idea but is no more than a glorified condition report, which PM's need to carry out regardless. However, the only exception could be if your place is furnished? If so, I could understand the PM wanting to charge something, if they intend to log and photograph every item for your records. Is this the case?
     
  9. lura

    lura Active Member

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    That does sound expensive

    Effective management of any investment property requires all licensed agents to comply with the relevant state legislation anyway.

    If your property is to be let out fully furnished - this fee can be justified. However, if it is to be rented out vacant, this price is expensive.

    To protect yourself, take lots of photos and make lots of notes of the condition of the property. Include all the small things you don't think is important e.g note where and how big the scuff marks are on walls - generally property managers will only vaguely say "walls some scuffs" the end result is that each subsequent tenant will add more scuffs and because the entry condition report is so vague, in addition to the likeliihood that the property manager who did the entry condition report is no longer there - the property manager who has to do the vacate report has very little to stand on.

    There are lots of things you can do to protect yourself and to ensure you don't get too many maintenance calls before you leave your property - cheaper to do it while youy are there.

    I can give you a thorough list of things you can do - if it's of any interest.
     
  10. DaveA

    DaveA Well-Known Member

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    That thorough list would be fantastic to share if you dont mind...
     
  11. lura

    lura Active Member

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    Preparing your property for tenancy

    Hi Dave,
    1. Condition of property - Take the photos - start from the front of the house. If you have a digital camera - great. The time you invest in making notes to each photo now will mean less hassle for you when the property manager rings later with issues because you can go back to your photos and say yes - ok or no - that wasn't there etc.

    Take photos at different angles - you may miss things that may come up later.

    OUTSIDE:
    Cleanliness - especially outside the house is always contentious with tenants. If you have it cleaned before you give it to the property managers and you document this. You can expect that the house will be returned in the same condition at the end of the tenancy - no cobwebs, no dusty and dirty exterior windows, no overgrown weeds.

    **this is important because the street appeal of your property directly corolates to the ease of renting and yield.

    Good working order: check everything you have outside is in good working order. locks, hinges, taps - if they are make notes. If they ar not, assess whether it is worth changing it now. If you do so, again make notes. Check you fencing - it may not need repairing of replacing - but if you are going to be away from the property for a long time, you need to know in what condition you left your property.

    INSIDE:
    Take photos of and make notes about scuff marks, paint chips, dents etc for:-
    doorways, doors, skirting, cornices, walls, ceilings
    lights/fans/air conditioners
    powerpoints, light switches
    kitchen cabinets - doors, drawers, handles, appliances
    bathroom - cabinets, doors, handles, basins, taps, shower screens, bath, tiles - floor and walls.
    Windows, window furnishings, locks etc

    HOW TO: do this room by room, if you have a videocam - use this, it can save you lots of time.
     
  12. lura

    lura Active Member

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    cont...

    Hi Dave,

    For some reason i lost 80% of my reply - maybe too long?

    I can email it to you if you like - my email is lvang@bigpond.net.au

    Let me know what you would prefer- I can keep replying on here - but I don't know how much it will take.
     
  13. Jacque

    Jacque Team InvestEd

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    Hi Lura

    I'm sure lots of readers would appreciate the whole reply. Could you copy it onto a word doc and attach it to your post? Simply look for the paperclip sign (next to the smiley face) when you compose a new message and we can all benefit from your tips- I know I'd like to read them all as well. List sounds great so far :)
     
  14. lura

    lura Active Member

    Joined:
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    Location:
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    Preparing your property for tenancy - list

    Preparing your property to be tenanted
    1. Take lots of photos
    2. Take lots of notes

    cont.

    3. Ensure the property is clean
    Leave the property in the condition you want it to be kept in; once you document this with all the notes and photos it will become a reference point for you and your property managers.

    By law, the tenants are to maintain the property to a standard upon entry less “reasonable wear and tear.” Therefore the property must be cleaned as you have done it. I’ll list some things that you should definitely do and make sure that any future tenant does it – because tenants generally fail to do these?:-

    • Clean all skirting boards and cornices – so many cobwebs get left behind and so many property managers do not look up.
    • Clean all power points and light switches
    • Clean window sills and grooves
    • Clean curtains/blinds – especially for dust and cobwebs at the top – over time, if this is not done the window furnishings become harder to clean and again detracts from the rental appeal to prospective tenants.
    • Clean light fittings – ensure your light fittings can be cleaned – if it poses a safety issue ie. Hard to reach or very fragile, you may not want them to clean it. If this is the case, you will need to consider how this will be done in the future safely – bugs in lights detracts from appeal of property, therefore may increase rental downtime and decrease yield.
    • Ovens, exhausts – the grills are always a contentious issue at end of tenancy. If your oven is an upright and mobile – pull this out and clean behind it. The issues associated with failure to do this may be cockroaches and possibly vermin to the food scraps that fall behind. And expect a good property manager to check this at vacates because you have done it prior to tenanting the property.
    This also applies to dishwashers – the moisture issue surrounding dirty dishwashers increases likelihood of pests.
    • In the bathroom, exhausts in general get overlooked in the cleaning.
    Tip: check all silicone and grout – re-silicone, re-grout if required. This will prevent possible water damage to your walls. Generally tenants will not notice these things until water starts leaking into the adjoining floors – by this time it will have already caused damage in the hundreds. Cost of companies to come and re-seal the bathroom >$500 and most of the time, it is loose aged grouting and/or silicone. If it is a plumbing issue, it is different and you will have little chance to pick this up prior to leaving the property.
    • Outside – weed all you gardens, mow and ensure the property is the way you want it at the end of the tenancy. Taking the photos will ensure your property manager has a reference point to come back to. The only lawn maintenance you should then be up for will be if the property remains vacant for longer periods allowing weed and grass to grow beyond an acceptable level for any new tenancy. It always pays to have it done properly prior to a tenancy because everyone has differing levels of what they perceived as acceptable, some property managers will let small things pass by because one, they don’t want to offend the vacating tenants or two, they think it’s okay themselves. If this continues after a few tenancies – your property may well look like it is a “renter”. By doing this you will protect the street appeal of your property hence again the rental appeal and yield it will provide for you and your family.
    • Clean eaves and external windowsills of dust and cobwebs and mildew if applicable. Same applies to outdoor lighting – it is generally forgotten.

    4. Ensure the property is safe
    • Smoke detectors – check with your local regulatory authority whether this needs to be hard-wired in. If it does not then you will need to provide brand new batteries – buy new ones and keep the receipt. This is extremely important because you may need to prove you did this. It is a relatively new provision in many states and therefore not yet tested in law, so cover yourself because many property managers are not aware of this and may not even note it in there entry reports. The onus will fall on the tenant to then replace the batteries in due course as and when it is required if that time frame is within their lease agreement unless they are physically unable to do so in which case, they will need to notify the property managers. This may seem like an obvious thing to do – replace batteries in smoke detectors – but you never know what kind of person will be renting your property. There are people out there who believe that the house is not theirs and therefore do not have to lift a finger to do anything! So cover yourself.
    In Qld a husband and wife was recently found guilty of failing to install smoke detectors in their investment property – a fire ensued and I believe someone did die – when I locate the case again I will confirm these details.
    • Safety switches – check with your regulatory authority the requirements for your area. It pays to install one if you do not already have it. You may also require this for your insurance.
    • Power points and light switches inside – make sure they all work and not loose.
    • Locks – doors and windows – make sure they are all working. You will need to provide at least two sets of keys to the property managers – advise you provide them with three sets – one as a management set and two as tenant sets.
    • Tripping issues – check all around your home for potential tripping issues. Check pathways for broken raised concrete/paving, check lawns and other traffic areas for surface roots, check all traffic areas for small holes in the ground that may have the ability to cause someone to trip. Check inside for loose carpeting – 2003 Justice John Helman found in favour of the tenant and awarded $1.2m for back injuries sustained as a result of loose carpeting where repair was requested but had not been carried out.
    IMPORTANT – everything you check – make notes of and if you want, give a copy to the property managers.
    5. Insurance
    • You will need to get landlord insurance for your property – make sure you get rent cover and good public liability cover.
    • Make sure you provide these details to your property manager and provide them with something in writing to authorise them to make claims on your behalf. They can also pay renewals at your request – given the rate they are charging you for the management – they may as well do this for you. Find out if they will be charging you for processing insurance claims – so companies do so – some don’t.
    6. Make list of all appliance makes and models
    • Make a list of all appliance models. If any are under warranty – ensure the property managers are aware of this – they will then need to file this in their system under maintenance instructions – so claims can be made against the warranty if applicable.
    7. Some maintenance tips:
    • Taps and washers – if any need changing or a close to requiring – do so now while you are at the property. I would advise if you are able to do it yourself, change all the washers – at least this way, you give yourself at least a year before a washer issue arises.
    • Hinges on doors and cupboards – if any of them need tightening – do so now. You would be surprised how many tenants do not own screwdrivers or know how to use one.
    If you go through everything I have listed above – you will be ready to leave your property in the hands of property managers and tenants.
    Give a copy of your extensive lists and photos or video to the property managers. Good property managers will do everything they can within the law to protect you and your investment . Good luck with your move.